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- Title
Demand complementarities and cross‐country price differences.
- Authors
Murphy, Daniel
- Abstract
Empirical studies document that markups vary across destinations. This paper proposes a novel mechanism to explain variation in markups: consumers' utility from final goods and services depends on their consumption of complementary goods and services. In countries with more complementary goods and services, consumer demand is less elastic, enabling monopolistically competitive firms to charge higher prices. The paper provides empirical evidence documenting a dependence of prices on demand complementarities.
- Subjects
COMPLEMENTARITY constraints (Mathematics); ELASTICITY (Economics); PUBLIC safety; MARGINAL utility; ELECTRICITY
- Publication
Canadian Journal of Economics, 2019, Vol 52, Issue 1, p253
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/caje.12371